Bitcoin Price Struggles as 6.7M BTC Sits Underwater, Glassnode Reports

The Bitcoin price struggles narrative has once again taken center stage in the crypto market on-chain analytics firm Glassnode reveals that approximately 6.7 million BTC sits underwater. This term, widely used in market analysis, refers to Bitcoin holdings that are currently valued below their acquisition price. When such a large portion of circulating supply is underwater, it reflects not just short-term price weakness but deeper structural and psychological dynamics shaping investor behavior.

Bitcoin has historically moved in cycles defined by optimism, capitulation, recovery, and renewed growth. However, the current phase presents unique challenges. Macroeconomic uncertainty, shifting interest rate expectations, regulatory pressure, and changing investor demographics all contribute to why the Bitcoin price struggles despite strong long-term fundamentals. Glassnode’s data provides crucial insight into how unrealized losses impact market sentiment, liquidity, and future price trajectories.

This article explores the implications of 6.7 million BTC sitting underwater, what it means for different types of investors, how on-chain metrics explain the current stagnation, and whether this situation represents risk or opportunity. By examining historical parallels and market psychology, we can better understand where Bitcoin may be headed next.

What “Underwater Bitcoin” Really Means

Defining Underwater Supply in the Bitcoin Market

When analysts say Bitcoin is underwater, they refer to coins whose current market value is lower than the price at which they were last moved on-chain. According to Glassnode, nearly 6.7 million BTC sits underwater, representing a significant portion of the circulating supply. This metric is essential because it highlights unrealized losses rather than realized ones, showing the latent pressure within the market.

The fact that the Bitcoin price struggles while so much supply remains underwater indicates that many investors are reluctant to sell at a loss. This reluctance reduces selling pressure in the short term but can also suppress buying momentum, as confidence weakens.

Why Glassnode’s On-Chain Data Matters

Glassnode’s analysis goes beyond simple price charts. By tracking on-chain movements, realized price, and holder behavior, it provides a more nuanced picture of market health. The underwater supply metric has historically been associated with late-stage bear markets or early recovery phases. This suggests that while the Bitcoin price struggles, it may also be laying the groundwork for future stabilization.

Why the Bitcoin Price Struggles Amid Rising Underwater Supply

Market Psychology and Unrealized Losses

One of the primary reasons the Bitcoin price struggles is investor psychology. When a large percentage of holders are in unrealized loss, fear and uncertainty dominate decision-making. Investors become risk-averse, reducing trading volume and speculative inflows. This creates a feedback loop where low demand reinforces stagnant or declining prices.

Impact on Short-Term and Long-Term Holders

Glassnode’s data shows that short-term holders are disproportionately affected by underwater conditions. These investors typically bought Bitcoin near local highs and are more sensitive to price fluctuations. Long-term holders, on the other hand, often remain resilient, viewing price weakness as temporary. Their conviction helps prevent deeper crashes but does not necessarily trigger immediate recoveries, which is why the Bitcoin price struggles to gain momentum.

Historical Context: What Past Cycles Tell Us

Comparing Current Data to Previous Bear Markets

In previous bitcoin market cycles, similar levels of underwater Bitcoin supply were observed near market bottoms. During the 2018 bear market and the 2022 downturn, millions of BTC sat underwater for extended periods before recovery began. This historical pattern suggests that while the Bitcoin price struggles, it may also be approaching a transitional phase.

Lessons From Recovery Phases

Historically, once underwater supply begins to decrease steadily, it signals renewed confidence and accumulation. Investors gradually regain trust as prices stabilize above key on-chain cost bases. While there is no guarantee of repetition, history indicates that prolonged underwater conditions often precede strong recoveries.

The Role of Macroeconomic Factors

Interest Rates and Global Liquidity

Beyond on-chain metrics, macroeconomic conditions heavily influence why the Bitcoin price struggles. High interest rates reduce risk appetite, drawing capital away from speculative assets like cryptocurrencies. Until global liquidity conditions improve, Bitcoin may continue to face headwinds regardless of on-chain fundamentals.

Regulatory Uncertainty and Market Confidence

Regulatory developments also weigh on sentiment. Unclear or restrictive policies can discourage institutional participation, limiting demand. When combined with a large underwater supply, regulatory uncertainty amplifies caution across the market.

Glassnode Insights on Holder Behavior

Long-Term Holders Show Resilience

Glassnode reports that long-term holders continue to hold the majority of underwater Bitcoin. This resilience reduces the likelihood of panic-driven sell-offs. Even as the Bitcoin price struggles, long-term holders historically act as a stabilizing force, absorbing supply and dampening volatility.

Short-Term Holders and Capitulation Risks

Short-term holders, however, are more likely to capitulate if prices fall further. Their behavior can increase volatility during downturns. Understanding this dynamic helps explain sudden price drops even during periods of overall market stagnation.

Supply Dynamics and Their Effect on Price Action

Reduced Selling Pressure at a Loss

When a significant amount of BTC is underwater, selling pressure often decreases because investors prefer to wait for break-even levels. This phenomenon can create a price floor, even as the Bitcoin price struggles to break higher.

Liquidity Constraints and Sideways Markets

At the same time, reduced selling does not necessarily mean increased buying. Many investors remain on the sidelines, leading to low liquidity and sideways price action. This environment can persist for months, testing investor patience.

Is This a Risk or an Opportunity?

Contrarian Perspectives on Underwater Bitcoin

Contrarian investors often view high underwater supply as an opportunity rather than a risk. Historically, periods when the Bitcoin price struggles and many coins sit underwater have offered attractive long-term entry points. These phases tend to reward patience rather than short-term speculation.

Risk Management in Uncertain Conditions

However, opportunity does not come without risk. Macroeconomic uncertainty and potential regulatory shifts mean that recovery timelines remain unpredictable. Investors must balance optimism with disciplined risk management.

Technical and On-Chain Indicators to Watch

Realized Price and Cost Basis Levels

One key metric is Bitcoin’s realized price, which represents the average cost basis of all coins. When the spot price trades below this level, it confirms that the Bitcoin price struggles relative to aggregate investor positioning. A sustained move above realized price often signals trend reversal.

Network Activity and Accumulation Trends

Rising network activity, increasing wallet balances, and accumulation by long-term holders are positive signs. These indicators suggest underlying demand even during periods of price weakness.

Institutional and Retail Investor Dynamics

Institutional Caution Amid Market Stress

Institutions tend to reduce exposure when volatility rises and returns remain uncertain. The fact that 6.7M BTC sits underwater reinforces cautious positioning among professional investors, delaying large-scale capital inflows.

Retail Sentiment and Behavioral Shifts

Retail investors, driven by sentiment, often react more emotionally. Fear dominates when the Bitcoin price struggles, but renewed optimism can spread quickly once recovery begins. Monitoring sentiment indicators provides insight into potential turning points.

The Broader Implications for the Crypto Market

Bitcoin as a Market Benchmark

Bitcoin’s performance influences the entire crypto ecosystem. When the Bitcoin price struggles, altcoins often experience amplified weakness. Conversely, stabilization in Bitcoin can restore confidence across the market.

Long-Term Adoption Versus Short-Term Volatility

Despite current challenges, Bitcoin adoption continues at a structural level. Payment integration, institutional custody solutions, and network development progress regardless of short-term price movements. This divergence highlights why underwater supply does not necessarily undermine long-term value.

Future Outlook: What Comes Next for Bitcoin?

Scenarios for Recovery or Further Consolidation

If macro conditions improve and on-chain indicators strengthen, Bitcoin could gradually recover as underwater supply decreases. Alternatively, prolonged consolidation may continue if external pressures persist. In either case, understanding why the Bitcoin price struggles today helps investors prepare for tomorrow.

The Role of Patience in Crypto Investing

Bitcoin has repeatedly demonstrated that patience is often rewarded. Periods of stagnation and underwater supply have historically set the stage for future growth, even if the timing remains uncertain.

Conclusion

The revelation that 6.7M BTC sits underwater, as reported by Glassnode, provides valuable insight into why the Bitcoin price struggles in the current market environment. This condition reflects not just price weakness but complex interactions between investor psychology, macroeconomic factors, and on-chain dynamics. While such periods test confidence, history suggests they are often transitional rather than terminal.

For investors, the key takeaway is balance. Recognizing the risks associated with prolonged underwater supply is essential, but so is understanding the opportunities it may present. Bitcoin’s long-term narrative remains intact, even as short-term challenges dominate headlines. As the market evolves, on-chain data will continue to serve as a critical guide for navigating uncertainty.

FAQs

Q: What does it mean when Bitcoin is underwater?

It means the current market price of Bitcoin is below the average purchase price of certain holders, resulting in unrealized losses.

Q: Why does Glassnode’s report matter for investors?

Glassnode provides on-chain data that reveals investor behavior and market health beyond price charts, helping investors make informed decisions.

Q: Is having 6.7M BTC underwater a bearish signal?

It often reflects market stress, but historically it has also appeared near market bottoms, making it a neutral-to-long-term bullish indicator.

Q: How does underwater supply affect Bitcoin price movement?

It can reduce selling pressure but also dampen buying interest, leading to sideways or sluggish price action.

Q: Should long-term investors be concerned that the Bitcoin price struggles?

Long-term investors often view such periods as part of normal market cycles, focusing on fundamentals rather than short-term price fluctuations.